Appellants aware of generator deficiencies years before expert report
The Ontario Court of Appeal has upheld a decision that a negligent misrepresentation action was statute-barred and the appellants did not need to commission an expert report to confirm what they reasonably should have known.
The appellants – Amelin Engineering Ltd. and its founder and president, Michael Elinson – bought multiple steam generators from the respondents, Blower Engineering Inc. and Steam-Eng Inc., starting in 1995 and for several years afterward.
Also in 1995, Elinson entered into a five-year agency agreement with the respondents. The agreement provided that he would sell the generators that Blower and Steam-Eng designed and manufactured. The parties extended the period by five more years.
The appellants immediately experienced numerous technical deficiencies with the generators. Critical components would disintegrate within a few days of operation. The generators would produce unacceptably high levels of carbon monoxide and nitrogen oxides and would operate at below their rated maximum output. Over several years, the parties made repairs to the generators.
The appellants then commissioned an independent firm, Bell Combustion, to conduct tests on one of the respondents’ generators. On April 16, 2003, Bell Combustion delivered its report finding inherent flaws in the machines.
The appellants sent the respondents a letter explaining their difficulties with the generators. The respondents demanded outstanding payments and terminated the agreement with the appellants via a January 2004 letter.
On April 3, 2009, the appellants brought a claim for negligent misrepresentation. The respondents issued a counterclaim asking for a set-off for unpaid invoices. The parties agreed that the following applied to their case: the transition provisions of Ontario’s Limitations Act, 2002; the six-year limitation period under Ontario’s Limitations Act, 1990; and the discoverability factors under the Limitations Act, 2002.
In September 2021, Justice Audrey Ramsay of the Ontario Superior Court of Justice dismissed the appellants’ claim for being statute-barred. The trial judge ruled that the appellants knew or should have known about their potential claim as early as 1998. They were aware of the high gas emissions by late 2002 and did not need an independent report to know that they suffered damage or injury, the judge said.
The judge held that the appellants’ claim also could not succeed on its merits since Elinson did not rely on any untrue, misleading, or inaccurate representation. She dismissed the respondents’ counterclaim for lack of evidence about the due date of the debts.
In Amelin Engineering Ltd. v. Blower Engineering Inc., 2022 ONCA 785, the Ontario Court of Appeal dismissed the appeal on the ground that the action was statute-barred. The appellants’ decision to not file their claim until April 2009 was unreasonable in the circumstances, the appellate court said.
First, the appellants argued that the trial judge failed to consider s. 5(1)(a)(iv) of the Limitations Act, 2002. While the judge did not specifically address this section, she properly found that the claim was statute-barred, the appellate court said.
Next, the appellants contended that they issued their claim within the required six-year period because the respondents’ assurances and ameliorative efforts delayed the discoverability of their claim until May 2003 when repair efforts ended or until April 16, 2003, when Bell Combustion’s report was delivered.
The Court of Appeal disagreed and noted that this case involved two professional engineers, Elinson and the respondent’s president. The respondent’s president presumably had greater knowledge since he invented the generators.
However, Elinson had extensive experience in the thermal generation industry, could make his own judgment, and should have done so well before the receipt of Bell Combustion’s report, the appellate court said. Ameliorative efforts were ongoing several years before the appellants decided to retain Bell Combustion, the appellate court added.
Since the appellant’s action was statute-barred, the Court of Appeal saw no need to consider the substance of the judge’s decision on the negligent misrepresentation claim.